The Nigerian Oil And Gas Local Content Regime And Its (Non-)Compliance With The Trims Agreement

Abstract

One major milestone for the Nigerian oil and gas industry was the enactment
of the Nigerian Oil and Gas Industry Content Development Act in 2010. The
Act establishes a comprehensive local content regime that enshrines legal
measures which promote the patronage of Nigerian products and services by
operators in the Nigerian oil and gas industry. This article examines the
provisions of the Act and Nigeria’s obligations under the WTO’s Trade Related
Investment Measures (TRIMS) Agreement with a view to determining whether
the provisions of the Act are in violation of Nigeria’s obligations under the
TRIMS Agreement. It also examines whether any exemptions can justify the
derogation of Nigeria’s obligations under the TRIMS Agreement. The article
finds that requirements under the Act constitute trade-related “investment
measures” within the meaning of the TRIMS Agreement because such
requirements are explicitly meant to apply to “all operations or transactions”
connected with the oil and gas industry. This article also finds that some
provisions of the Act are not in compliance with Nigeria’s obligations under
the TRIMS Agreement. In particular, sections 10 (1), 11(1), and 12 of the Act
which favour the use of local products and materials for projects in the oil
and gas industry contravene Nigeria’s obligations under the TRIMS Agreement.
The article further identifies exemptions which can justify Nigeria’s application
of oil and gas industry local content measures that derogate obligations under
the TRIMS Agreement. In this regard, the article suggests that the exemptions
under Article 4 of the TRIMS Agreement, which permit a WTO member whose
economy is in the early stages of development and can only support low
standards of living to temporarily apply local content measures, can be applied
by Nigeria to justify the oil and gas industry local content measures under the
Act for the purpose of promoting economic development and improving living
standards in the country.